The government is considering a proposal to free up foreign direct investment (FDI) policy on retail but only for domestically manufactured goods.

The policy under consideration applies to both offline and online retail and would remove restrictions on companies such as Walmart, Tesco, Amazon and others when it comes to the sale of things produced in the country. Apart from attracting investment in retail, such a policy would also give a big boost to the Make in India program.

The government is expected to take a decision after the Uttar Pradesh assembly elections. Overseas-owned online retailers can only function as marketplaces, or platforms for buyers and vendors, and arenít to sell goods on their own account through an inventory model. Multibrand retailers such as Walmart can only own up to 51% of Indian ventures and are subject to other constraints as well.

The current policy allows domestic manufacturers to sell just their own goods through any channel ó online or offline. Only in the case of food products can locally processed items be sold by anyone through any mode, a policy change made in August last year to give a boost to food processing. Retailers have been lobbying for similar exceptions to be made for grocery and personal care items as well.

The government wants to bolster manufacturing as part of its job-creation strategy. Manufacturing has lagged behind services in total FDI. Amazon recently submitted a proposal to the government for setting up brick-and-mortar stores to sell locally made food products alongside its online platform in India. In an earlier proposal, the online retailer had pushed for a hybrid model under which it could sell its own products as well as those of independent sellers. This was turned down as it didnít support the Make in India strategy.